Russia’s excess grain headache

Russia’s high yield of grain crops this year are giving managers of storage facilities a headache. Low prices are keeping traders from selling grain, meaning there's too much stock.

The Krasnodar grain storage facility is a Fort Knox to the region's agriculture. The country’s south is famous for its good grain crops and the quality of the product – the local grain is dry and rich in protein.

“Therefore it’s suitable for exporting, since these are the qualities preferred by foreign buyers,” says Lyubov Timoshchyuk from the local grain storage lab.

In the Krasnodar Region alone, more than 9.3 million tons of grain have been collected and stored in 2009. The task of keeping 50,000 tons of grain stored for months and even years is not an easy one.

Russia’s agricultural industry suffered a 13 per cent fall in value in August. Countrywide statistics show that, in addition to this year’s crops, more than 8 million tons of grain from 2008 is still waiting to be sold to clients abroad – all without success. Prices are too low, and that's keeping traders from selling.

“Unfortunately, the situation on the world markets has got worse in comparison with last year. So we think that export numbers will be lower – an estimate of 16 to 20 billion tons, depending on various export factors,” says Arkady Zlochevsky, President of the Russian Grain Union. “These numbers are crucial, and we have to sell abroad at no less than these amounts, because otherwise the pressure on the domestic market will be growing over time.”

Russia’s government promised to intervene by purchasing grain for domestic needs at a higher price, thus lifting the burden of overstock off agricultural companies and grain storage facilities.

Exporters are also hopeful of positive change, even if it doesn't come all that soon. Arkady Zlochevsky says he expects prices at the world market to start growing in February or March next year.